Council considers extension of district tax

NATIONAL CITY  National City council members Tuesday ﻿considered an extension of the city’s one-cent district sales tax for National City residents as a way to bring in additional revenue to the city.

Voters approved the tax, also known as Proposition D, in 2006, and it generates about $10 million a year. The proposition called for the tax to expire in September 2016.

While the council hasn’t decided the extension length, it will likely be at least 10 years. The council initially tried to pass the tax with no expiration but it failed.

The discussion stemmed from the need to continue critical services and programs following the tax’s sunset.

Ballot language for the tax extension will come back to the council in June for consideration, City Manager Leslie Deese said.

Michael Busch, the president of Urban Futures Inc., who was hired by the city as a financial adviser about four years ago, provided local taxation options Tuesday ﻿through an analysis of supplemental revenue alternatives. They included a variety of general and special tax options, including parcel tax, local sales tax, utility user tax, transient occupancy tax and real estate tax.

A general tax can be used for any public purpose with funds deposited into the city’s general fund with a 50 percent plus one vote required to impose, increase or extend a general tax, while a special taxes vary in that they are imposed for specific purposes such as law enforcement or street maintenance and requires a two-thirds majority vote.

Busch found that in general, the most successful taxes among voters included sales, hotel and utility users, but he said a district sales tax is most beneficial based on the city’s insufficient revenue to cover expenditures.

“You’re dealing with a state that has an appetite for whatever you’re cooking and you have to be able to protect yourself,” Busch said.

Busch said cities are facing what he called the perfect storm: the aftermath of a recession, elimination of redevelopment funds and most recently public employee pension reform, which imposes significant cost increases beginning in 2016.

“Governments have found creative ways to find revenues and sales tax is definitely one of them,” Busch said, adding that local sales tax generates the most money to a community and allows for general and special purpose. “It lowers the threshold to a majority of voters.”

Morrison said the district tax was initially meant as a short-term solution.

“When we did ours in 2006 the Great Recession hadn’t hit yet,” he said. “We saw a way of building our way out of this. The idea was for this not to be permanent but through increased revenues and budget constraints, we would have been out of this in 10 years.”

Busch said another benefit is that it is not collected on sales of necessities, meaning it softens impact upon residents.

“I think the benefit of what we have received (from the tax) has really outweighed some of the fees that as National City residents that we have to pay,” Councilwoman Alejandra Sotelo-Solis said.